Advertisement

Diaspora Bonds and Caribbean Economic Development

Tapping into an Innovative Financing Mechanism
  • Jwala Rambarran
  • Prakash Ramlakhan
Chapter

Abstract

The Caribbean has one of the highest emigration rates in the world and the region is the largest recipient of remittances in relation to its GDP. At the same time, many Caribbean countries have seen a dramatic reduction in flows of official development assistance (ODA) and have been encountering difficulties in obtaining private financing using traditional financial instruments, a situation which jeopardizes their prospects for long-term growth and employment generation. Inevitably, the Caribbean will need to adopt innovative financing mechanisms to target previously untapped investors. Diaspora bonds are one such mechanism that can enable the region to borrow from its diaspora community. For diaspora investors, these bonds offer the opportunity to help their country of origin while also providing an investment opportunity. This paper investigates how best the Caribbean can tap into the wealth of its diaspora during difficult times to obtain a stable and cheap source of external finance. Section 6.2 discusses the rationale for origin countries to issue and for diaspora communities to purchase diaspora bonds. Section 6.3 highlights some lessons for the Caribbean from the experiences of India and Israel, two countries which have successfully issued over US$35 billion in diaspora bonds. Section 6.4 presents the external financing needs of Caribbean countries and puts forward some ideas on the potential for issuing diaspora bonds to help narrow these gaps. Finally, Section 6.5 concludes with a summary of findings anddirection for future research.

Keywords

Foreign Direct Investment Destination Country Foreign Direct Investment Inflow International Capital Market Debt Relief 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Africa Development Bank. (2010, December). Africa Economic Brief, 1(17), 5.Google Scholar
  2. Central Bank of Sri Lanka. (2010, June). Sri Lanka development bonds – Document of offer.Google Scholar
  3. Clemens, M., & Pritchett, L. (2008). Income per natural: Measuring development as if people mattered more than places. Population and Development Review, 34(3), 395–434.CrossRefGoogle Scholar
  4. Gelb, A., Ramachandran, V., & Turner, G. (2006, November 22–24). Stimulating growth and investment in Africa: From macro to micro reforms. Paper prepared for AfDB-AERC conference, Tunis.Google Scholar
  5. International Monetary Fund (IMF). (2009, June). Eastern Caribbean currency union: 2009 discussion on common policies of member countries – staff report; and public information notice on the executive board discussion, IMF Country report no. 09/175, Washington, DC.Google Scholar
  6. International Monetary Fund (IMF). (2010, June). Guyana: 2010 article IV consultation–staff report, supplement, public information notice on the executive board discussion and statement by the executive director for Guyana, IMF Country report no. 11/152, Washington.Google Scholar
  7. Ketkar, S., & Ratha, D. (2007, May). Development finance via diaspora bonds: Track record and potential. Paper presented at the Migration and Development conference at the World Bank, Washington, DC.Google Scholar
  8. Ketkar, S., & Ratha, D. (2010). Diaspora bonds: Tapping the diaspora during difficult times. Journal of International Commerce, Economics and Policy, 1(2), 251–263. World Scientific Publishing Company.CrossRefGoogle Scholar
  9. Mishra, P. (2006). Emigration and brain drain: Evidence from the Caribbean (IMF working paper WP/06/25, January). Washington, DC: International Monetary Fund.Google Scholar
  10. Negash, M. (2009). Ethiopian diaspora investment potential and EEPCO’s millennium bond. University of Witwatersrand, Mimeo.Google Scholar
  11. Plaza, S. (2009, July). Promoting diaspora linkages: The role of embassies. Paper presented at the international conference on Diaspora for Development at the World Bank, Washington, DC.Google Scholar
  12. Ratha, D., & Mohapatra, S. (2011, February). Preliminary estimates of diaspora savings, Migration and development brief no. 14, Migration and Remittances Unit, World Bank, Washington, DC.Google Scholar
  13. Ratha, D., Mohapatra, S., & Plaza, S. (2008). Beyond aid: New sources of innovative mechanisms for financing development in Sub-Saharan Africa’ (Policy research working paper WPS 4609). Washington, DC: World Bank.Google Scholar
  14. Rehavi, Y., & Asher, W. (2004, September 6). Fifty years of external finance via State of Israel non-negotiable bonds, Foreign Exchange Activity Department, Assets and Liabilities Unit, Bank of Israel.Google Scholar
  15. Sahay, R. (2005). Stabilization, debt & Fiscal policy in the Caribbean (IMF working paper WP/05/26, February). Washington, DC: International Monetary Fund.Google Scholar
  16. U.S. Department of State. (2010). Engaging with diaspora communities: Focus on EAP, EUR, and NEA, summary report, Foreign Service Institute Leadership and Management School Policy Leadership Division and the Global Partnership Initiative, Foreign Policy Institute, Office of the Secretary of State. Washington, DC.Google Scholar
  17. World Bank. (2011). Migration and remittances factbook 2011. Compiled by D. Ratha, S. Mohapatra, & A. Silwal, Migration and Remittances Unit, World Bank, Washington, DC.Google Scholar
  18. World Bank. (1999). Sub-Saharan Africa benefits from the first IDA guarantee for Azito (Project finance and guarantees notes). Washington, DC: World Bank Private Sector and Infrastructure Vice-Presidency.Google Scholar

Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.National Institute for Higher Education, Research Science & Technology (NIHERST)Port of SpainTrinidad & Tobago
  2. 2.Banking and FinanceUniversity of the West IndiesPort of SpainTrinidad & Tobago

Personalised recommendations